Buy the dip? Or not.
According to LBank perpetual contracts, FTT has fallen by more than 80% in 24 hours. What’s wrong with SBF, Alameda, and FTX? The big dump after the deal’s announcement between Binance proved the rumor is true.
SBF and his Kingdom
Sam Bankman-Fried was once admired as the king of crypto. Now Alameda and FTX are rumored to be on the brink of insolvency. SBF accumulated huge wealth in a very short time. He is famous for his arbitrage trading, founding FTX and Alameda, and investments like $Sol.
In the middle of this year, FTX has been leading huge fundraising rounds for new star projects like Aptos and Sui. He also bailed out BlockFi for $240m, bid for Voyager’s assets, and considered bailing out Celsius. In the upcoming midterm elections, he has donated almost $50m, this comes after his plan to donate $1B in the 2024 U.S. presidential election.
However, concerns started to bubble on Wednesday when Alameda’s balance sheet was leaked.
The problem
The balance sheet of Alameda revealed that “the net equity in the Alameda business is actually FTX’s own centrally controlled and printed-out-of-thin-air token”- Cory Klippsten.
At that time(Nov 03), Alameda research had $14.6 billion of assets, against $8b of liabilities. The assets include $3.66b FTT, $2.16B “FTT collateral”, $3.37B crypto ($292m SOL, $863m “locked SOL”), $134m USD & $2B “equity securities”. So, clearly, most net equity is tied in completely illiquid altcoins.
On Nov 06, Binance CEO CZ twitted that Binance decided to “liquidate any remaining FTT on our books”. FTT started to fall rapidly since then. And people started to withdraw their funds from FTX.
FTX prints FTT out of thin air; FTX lends FTT to Alameda Research; Alameda Research borrows USD Stables against FTT; Alameda Research sends USD stables to FTX.
REPEAT and infinite money!
Sounds familiar? That’s how Luna works.
On Nov 8, FTX asked for Binance help and admitted for the first time they have a significant liquidity crunch. And CZ claimed that they intend to fully acquire FTX.com and help cover the liquidity crunch. However, everything can not be nailed until a full DD is completed in the coming days.
After a short rebound, FTT and the whole market started to dump as the liability problem of FTX proved to be true. After a few hours, SEMAFOR published a SCOOP that people familiar with the matter provided. “FTX prints FTT out of thin air; FTX lends FTT to Alameda Research; Alameda Research borrows USD Stables against FTT; Alameda Research sends USD stables to FTX.” “ Two of the people briefed on Bankman-Fried’s efforts said the firm was seeking more than $1 billion in financing before the Binance deal was sealed, with one adding that by midday Tuesday the hole appeared far deeper — closer to $5 billion to $6 billion.”
FTT went to $2.5 after this. Bitcoin and Ethereum also fell by around 8% and 11%.
What’s next
More risks might be on the way. Here is a list:
Any primary projects(SOL, Aptos, Celestia…) that ever got invested in or controlled by FTX; Market makers that are going to lack liquidity; Crypto assets that are still in FTX’s treasury; Crypto exchanges can not provide proof of 1:1 reserve fund.
LBank will always protect your funds.
Stay SAFU!
NFA!
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